Sonata Software - Company Update - ICICI Securities

Sonata Software reported poor Q1FY21 results. IT service revenues in dollar terms fell 17.8% QoQ mainly due to 85.1% QoQ dip in travel vertical (mainly impacted by top client that is in travel vertical). However, IT service EBITDA margin improved 125 bps QoQ to 23.5% mainly led by lower travel cost and higher offshoring. IT service PAT declined 15% QoQ mainly due to lower other income. Domestic revenues increased 12.0% QoQ while PAT fell 30% QoQ mainly due to higher discounting. Consequently, overall revenues increased 3% QoQ to Rs. 952.4 crore while PAT fell 19.0% QoQ to Rs. 49.9 crore.

Valuation & Outlook

We expect the company to see improving revenues in coming quarters led by improvement in contribution from top client and traction in ISV vertical, essential retail, utility and commodity service. In addition, scaling of IP led revenues, rising proportion of digital and Sonata's partnership with Microsoft could boost revenue and margin in coming quarters. Hence, we increase our EPS estimates for FY21E and FY22E, prompting us to upgrade the stock from HOLD to BUY with a revised target price of Rs. 330/share.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Sonata_CoUpdate_Aug20.pdf

Shares of SONATA SOFTWARE LTD. was last trading in BSE at Rs.283.05 as compared to the previous close of Rs. 290.3. The total number of shares traded during the day was 41964 in over 1476 trades.

The stock hit an intraday high of Rs. 290.5 and intraday low of 272. The net turnover during the day was Rs. 11838529.

Source : Equity Bulls

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